LinkedIn falls as outlooks disappoint investors

NEW YORK (AP) -- LinkedIn shares fell Friday after the online professional networking service offered a weak earnings outlook, as it hires more workers, invests in data centers and tweaks the way that it shows online ads.

THE SPARK: Late Thursday LinkedIn Corp. provided second-quarter and full-year forecasts below analysts' estimates. The Mountain View, Calif., company expects second-quarter revenue between $342 million and $347 million for the April-June period. Analysts polled by FactSet forecast $360 million.

LinkedIn thinks full-year revenue will range from $1.43 billion to $1.46 billion. That's $20 million more than the company predicted a few months ago, but analysts were counting on $1.5 billion.

Another figure that troubled investors is LinkedIn's outlook for earnings before interest, taxes, depreciation and amortization, or EBITDA. That gives an indication of how much money the company is likely to make. LinkedIn expects full-year EBITDA of $330 million to $345 million for the full year, below analysts' expectations of $363 million.

THE BACKGROUND: LinkedIn has thrived by establishing itself as the go-to place for employers to find talented workers and for people to get job tips and other advice to manage their careers. It doesn't cost anything for people to set up a basic professional profile on the site. The company makes most of its money by charging employers and headhunters for analytical tools and additional access to LinkedIn profiles on the site.

The service now has 225 million members, up from 202 million members at the end of last year.

THE ANALYSIS: Arvind Bhatia of Sterne, Agee & Leach said in a client note that disappointing guidance was likely not the only thing rattling investors. While LinkedIn's first-quarter revenue topped Wall Street's estimates, Bhatia said it was the smallest beat since the company went public in 2011.

Bhatia maintained a "Neutral" rating on LinkedIn.

Cantor Fitzgerald's Youssef Squali echoed Bhatia's sentiment, saying that the beat was not as pronounced as in previous quarters. The analyst said the company experienced slowing revenue growth in its marketing solutions and premium subscription segments.

Squali kept a "Hold" rating on LinkedIn.

LinkedIn said it does not comment on analyst reports.

SHARE ACTION: Down $20.70, or 10.3 percent, to $180.97 in afternoon trading. The stock has traded in a 52-week range of $88 to $202.91. Year-to-date the shares are up about 76 percent and the stock topped $200 for the first time Thursday.